2 Chinese Tech Kings Team Up to Stop Apple From Dominating Future of Smartphones

Huawei Technologies, the world's largest telecommunications equipment supplier, has forged an artificial intelligence (AI) alliance with Chinese internet search provider Baidu (BIDU) in a move that ratchets up the competition against Apple (AAPL) in leading the future of smartphones.

The strategic cooperation with Huawei will kick off the AI-powered intelligent devices era, said Robin Li Yanhong, Baidu's chairman and chief executive, at the joint launch of their AI pact in Beijing on Thursday. There is much to look forward to an alliance between a smartphone company and an AI company, he said.

The goal is to foster a new mobile and AI ecosystem by leveraging Huawei's hiAI platform and Baidu Brain, a compendium of the company's AI assets and services, and combine hardware and software to provide global consumers with new smart service experiences, according to the two companies.

That would give Shenzhen-based Huawei, China's biggest smartphone brand, with an important edge in competing against Apple and other major players in the global mobile phone market, which will demand more devices with on-board AI capabilities over the next few years.

Baidu is the "most complementary match" for Huawei, said Richard Yu Chengdong, chief executive of Huawei's consumer business group, adding that the pair will put natural language and image processing technologies into the future generation of intelligent phones.

The tie-up also comes as Huawei expects the industry to further consolidate. "Most smartphone vendors would disappear due to intense competition," said Yu. "Only few would survive, which requires the finest user experience."

Research firm Counterpoint Technology recently forecast that more than half a billion smartphones - about one in three - that will be shipped around the world in 2020 are expected to have AI capabilities at the chip set level.

Nasdaq-listed Baidu, which runs the dominant online search service in China, and Huawei on Thursday pledged to bring "a personalised smart life experience to consumers" by collaborating on an AI-powered platform and related technologies, internet services and content, according to a joint statement.

Their strategic cooperation further intensifies efforts in China to build the level of its artificial intelligence development above those of the United States and other major economies.

In July, the Chinese government announced an initiative to foster a highly innovative and competitive domestic AI market, which it forecast to be worth about US$150 billion by 2030.

The cooperation with Huawei followed Baidu's AI pact with Xiaomi, which was announced in November, that involved developing advanced consumer electronics products powered by AI and connected to the internet of things.

Baidu has been making an aggressive transition to becoming an AI-first technology company, while both Xiaomi and Huawei continue to sharpen their focus on smarter mobile devices.

E-commerce services provider Alibaba Group Holding (BABA) and Tencent Holdings (TCEHY) , the world's largest video games company, have also increased their own AI development programmes to keep pace with Baidu in this field. New York-listed Alibaba owns the South China Morning Post.

In September, Huawei introduced its Kirin 970 chip to provide built-in AI capabilities on its new flagship smartphone, the Mate 10.

"The Huawei Mate 10 is able to accomplish diverse computational tasks efficiently, thanks to the neural processing unit at the heart of the Kirin 970," said a Counterpoint report in October.

The Kirin 970 is the second AI-capable chip in the market, following Apple's A11 Bionic system-on-a-chip that was designed for the iPhone 8, iPhone 8 Plus and the iPhone X.

Despite its headway in developing an AI chip, Huawei was expected to remain behind Apple in this new arena.

Counterpoint said Apple is likely to lead the world's AI-capable chip market through 2020 as its Bionic chip gets adopted across its whole portfolio of devices.

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